Use Of Formal Financial Services Research Articles

An Overview of Financial Inclusion in Nepal

This article provides an overview of financial inclusion in Nepal, which refers to the availability of financial services and products to individuals and businesses, particularly those in disadvantaged and low-income regions. The research methodology employed in this study is descriptive research. The documents which were published by the government were analyzed. Nepal Rastra Bank (NRB) and the Ministry of Finance were primary sources of information. These reports contained valuable insights into financial inclusion, economic growth indicators, and program outcomes. Microfinance institutions have been instrumental in advancing financial inclusion in Nepal, offering financial services to low-income people and small enterprises that would not otherwise have access to the official banking system. There is a positive association between financial inclusion and economic growth in Nepal, as access to credit and the use of formal financial services have contributed to short- and long-term economic growth. Similarly, financial inclusion has a positive impact on the economy by increasing the savings rate, broadening credit availability, lowering income inequality, supporting financial stability, and encouraging the expansion of the digital economy. The government of Nepal has implemented various initiatives to encourage financial inclusion, including expanding credit availability, promoting financial stability, and encouraging the growth of the digital economy. Overall, financial inclusion is seen as a crucial component of economic progress and is expected to become even more important as Nepal continues to develop.

The importance of financial education for the effective use of formal financial services

AbstractThis paper examines global data on unbanked and underbanked consumers to highlight the role improved financial literacy and capability could play in motivating and enabling the safe and beneficial use of financial services. The paper uses Global Findex data, a demand-side survey on ownership and use of accounts at formal financial institutions, such as a bank or similar financial institution, or a mobile money service provider. The paper reviews the self-reported barriers to account ownership and use cited by unbanked adults and identifies the challenges faced by account owners who could not use an account without help. Together, these issues point to the importance of financial education to improve digital and financial literacy skills, in addition to product design that considers customer abilities, and strong consumer safeguards to ensure that customers benefit from financial access.

Financial inclusion in developing countries: Do quality institutions matter?

This study examines the dynamic impact of institutional quality (control of corruption, government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability) on financial inclusion across seventy-three developing countries. We conduct multiple dynamic-panel-data approaches to address potential heterogeneity, cross-sectional dependency, and endogeneity issues. Our findings reveal that institutional quality promotes both the access to and the use of formal financial services in developing countries. More specifically, economic growth, human development index, domestic credit, financial development index (the depth & access to finance, and the efficiency of financial institutions and financial markets), and remittances significantly contribute to financial inclusion. Our findings also confirm our proposition that human development plays a significant role in driving financial inclusion. This study provides several practical policy implications to developing countries aiming to strengthen their institution-induced financial market deepening.

The unfolding of women’s economic empowerment outcomes: Time path of impacts in an Indonesia trial

This paper makes the case that some interventions designed to improve women’s economic lives need to be tracked long enough for women to manifest new and beneficial behaviors. The study analyzes the time paths of the predicted impacts in a randomized trial providing financial incentives to bank agents (on the supply-side) and basic business training to women business owners (on the demand-side) to facilitate their access to and use of formal financial services. The trial took place over a two-year period in 401 villages in five regencies of East Java province, Indonesia. Although predicted impacts of the treatments are positive and increasing over time for seven of eight economic empowerment outcomes analyzed, their time paths vary, with business profits and household income increasing sharply in the second year after increasing very little during the first year while business capital, improved business practices, personal savings and women’s agency increased linearly with time following treatment. A mediation analysis using a structural equations model finds significant direct and indirect effects between these economic empowerment-related outcomes: business practices, business capital and women’s agency contribute directly to increased business profits while personal savings, business profits itself and household income are indirect drivers; further, both treatments had a strong direct impact on household income that was reinforced by the direct effects of increased business profits. The article’s findings are consistent with other incipient evidence on the delayed effects of some interventions targeting women’s economic empowerment. They underline the need to measure impacts over a sufficiently long period, which in this case is at least two years after exposure to the treatments.

Mobile money: a gateway to achieving financial inclusion in Ghana

While emerging studies on mobile financial inclusion have focused on the factors driving the adoption of mobile money, little evidence exists on how the service is facilitating the use of formal financial services. Using the World Bank Findex data, we estimate the effect of mobile money adoption on the use of formal accounts, savings, and credit in Ghana. The results of the recursive bivariate probit analysis showed a significant symbiotic relationship between mobile money adoption and the probability of operating a formal account. Mobile money adoption has a positive effect on savings and access to credit but does not affect the avenues to savings and obtaining credit respectively. Mobile money users save in their wallet and obtain microcredit through the mobile money platform but not through formal channels. These findings reinforce the hypothesis that mobile money is the surest financial tool for achieving universal financial inclusion in developing countries.

Financial inclusion and education: An empirical study of financial inclusion in the face of the pandemic emergency due to Covid-19 in Latin America and the Caribbean.

Financial inclusion and education contribute to a country's development and economic growth. However, despite the significant efforts being made to increase access to financial products for women, a high percentage still do not have access to and effective use of formal financial services in the countries of Latin America and the Caribbean. This study analyzes financial inclusion (based on gender equality) in the countries studied using a pooled‐panel ordinary least squares econometric technique. Furthermore, the impact of interactions between the level of study, use of technology, academic degree during the Covid‐19 restrictions, number of credit borrowers, and number of borrowers with the interaction of the restrictions during the health emergency was evaluated employing the Gini coefficient and human development index (HDI). This study confirms that Latin America and the Caribbean countries can increase financial inclusion by changing their social aspects based on gender equality to ease using technology and access to credit. The results of this study are helpful for policy‐makers in formulating and implementing policies that lead to action plans that reverse an exclusionary financial system, promote financial education, and empower women.

Training vs. informal financial services for the promotion of financial literacy and inclusion in Uganda

Financial education aims to promote financial inclusion by increasing understanding and use of formal financial services. Despite such training, participation in informal financial practices remains high relative to formal ones in countries like Uganda. A cross-sectional sample survey of economically active urban financial service users is used to test whether financial education through formal training is associated with financial literacy (FL) and FL is associated with increased use of financial services, especially formal ones. The findings indicate that formal financial training is significantly associated with FL, and that higher FL is associated with higher use of both formal and informal financial services. The unexpectedly strong association of the use of informal financial services with financial literacy suggests that informal financial services may have a more complementary role than a simple model of financial formalization would imply. The study suggests that promoting informal financial services may be more efficient in raising financial literacy and inclusion than financial training.

WOMEN AND DIGITAL FINANCIAL INCLUSION IN INDONESIA AS EMERGING MARKET

Digital financial inclusion is digital access to and use of formal financial services. This paper aims to examine the significance of gender dimension in digital financial inclusion in Indonesia as an Emerging Market. By using surveys, we expect to relate women and digital financial inclusion. The ordinal logistic regression model was used as a method to model one of the key variables, gender. The result concluded that women as the gender we concerned gives a significant impact to behavioral intention that represents the digital financial inclusion. Keywords: women digital financial inclusion, financial services, gender dimension JEL Classifications: G4, I20 DOI: https://doi.org/10.32479/irmm.10212

English

The use of formal financial services has been associated with increased financial wellbeing and overall economic growth. Efforts to increase financial inclusion have emphasized financial literacy provided through formal training and education without due recognition that people’s financial behaviors and practices may be motivated by social interactions. The current study examines the moderating effects of social learning on the relationship between financial literacy and formal financial services usage within a developing country context. Survey data collected from a sample of 351 adults in Kampala, Uganda, was analyzed using Pearson correlation coefficients, hierarchical regression, and ModGraph. Findings reveal significant positive relationships between financial literacy, social learning, and usage of formal financial services. Results indicate that social learning moderates the relationship between financial literacy and financial services usage among people in Kampala. The study finds peers and friends to be critical socializing agents with a significant influence on formal financial services usage. Beyond the promotion of financial literacy, financial inclusion initiatives should recognize the effects of social learning to increase the use of formal financial services in countries such as Uganda. The study integrates aspects of the social learning theory into the financial services domain hitherto dominated by finance and economic models. Key words: Financial literacy, financial inclusion, Uganda

Migrant remittances and financial inclusion among households in Nigeria

ABSTRACTThis article investigates the impact of remittances on financial inclusion, using the 2009 World Bank’s Migration and Remittances Household Survey data for Nigeria. An instrumental variable estimation technique was used to estimate the impact of remittances on financial inclusion, and migrant network effect was used as an instrument to control for potential endogeneity between remittance and financial inclusion. This article finds that the receipt of remittances increases the probability of using formal financial services, such as deposit accounts and Internet/mobile banking. This article concludes that reducing barriers and costs to remittance inflows can improve the access to and use of formal financial services in Nigeria, which can lead to an increase in funds for investments and the economic growth of the country.

Informal Financing and the Use of Formal Financial Services among Small Holder Farmers in Kenya

Despite financial inclusion being a key driver of growth and income equality, developing countries continue to have significant proportion of populations without access and usage of basic formal financial services. Instead, most still subscribe to informal financial services, which have low or nonexistent entry barriers. In the context of small holder farmers, informal financial services can moderate their access to finance where there are gaps in the formal financial instrumentation. The present study, therefore, sought to determine the moderating effect of informal financial services on the use of formal financial services among small holder farmers in Kenya. The target population for this study were small holder farmers from Nakuru, Busia, and Kirinyaga counties in Kenya; a sample size of 496 was obtained and selected through purposive and stratified random sampling techniques. Data were collected using copies of a researcher-developed questionnaire and analyzed using multiple linear regression analysis with Stata. The findings reveal that informal financial services did not have a moderating effect on utilization of formal financial services among small holder farmers. The study recommends that the formal financial institutions develop products and work closely with informal financial services to encourage more utilization of financial services.

Factors Affecting Consumer Acceptance of Digital Financial Inclusion; An Anecdotal Evidence from Bogor City

Various surveys have been conducted over the past few years indicating financial access in Indonesia is still not good. Digital Financial Inclusion (DFI) which is a digital access to use of formal financial services by underserved populations to solve those problems. The success of the DFI services were not only determined by the service provider, but also by the acceptance of the users. The TAM (Technology Acceptance Model) model offers a powerful and simple explanation of the factors that affect user acceptance of a technology. The main purpose of this study was to understanding consumer acceptance of using DFI which was investigated and measured by several factors through the TAM model ie; perceived usefulness, perceived ease of use, perceived credibility, intention to use, and actual use. The population of this research was conducted in Bogor City because the level of financial inclusion in Bogor City was low but the digital development was quite good. And total sample was 134 respondent.The PLS SEM analysis showed that perceived usefulness has no significant effect (p> 0.05) to intention to use DFI services but perceived ease of use and credibility has significant (p <0.05) and positive effect to consumer interest in using DFI services. Perceived credibility is the most influencing consumer interest in using DFI service because it has the highest coefficient value. The results of this study were expected to improve the development and acceptance of DFI services.

Household Financial Access and Use of Alternative Financial Services in the U.S.: Two Sides of the Same Coin?

Financial access, or the household use of formal financial services, includes the ability to access transaction, credit, and investment products and services from formal financial institutions. In contrast, households that use Alternative Financial Services (AFS), or products and services from non-bank sources, lack full financial access and are considered financially excluded. Financial access is a necessary component of strong household financial well-being. Some researchers discuss the two as opposite sides of the same construct, or “two sides of the same coin” because they are closely related features of one idea. Using national data from the 2015 Financial Capability Study (n = 27,564), this study sought to explore the nature of the relationship between financial access and AFS use using confirmatory factor analysis. Results suggest that the two concepts are weakly and positively related, which suggests that they are not “two sides of the same coin”. The determinates of AFS use are complex, and may include social factors. A holistic approach to expanding financial access may be most effective. Policy implications are also discussed.

Financial Inclusion and Welfare in South Africa: Is there a Gender Gap?

Arguments on whether there is a gender gap in access to finance remain inconclusive. The welfare benefits of access to finance have also not been confirmed. This paper investigates whether there is a statistically significant difference between the welfare of financially included men and women, and of financially included women and their excluded counterparts. Using a pooled dataset on financial access in South Africa, we find that women mainly use formal transactional products and informal financial mechanisms, while men mainly use formal credit, insurance, and savings products. Despite this pattern in the use of financial products, a quantile regression analysis shows that there is no statistically significant difference between the welfare of financially included men and women. There is a significant difference, however, between the welfare of financially included women and their excluded female counterparts. Women using non-formal credit and insurance products exhibit higher welfare in the lower end of the welfare distribution. An Oaxaca-Blinder type decomposition shows that welfare differences are mainly accounted for by race, education, income, and, marginally, marital status. Estimates of the average treatment effect suggest a causal relationship between financial inclusion and higher welfare. The mechanism is through the accumulation of durable items following use of formal financial services.

Access to Finance in Sub-Saharan Africa: Is There a Gender Gap?

We show the existence of an unconditional gender gap in Sub-Saharan Africa. However, when key observable characteristics of the enterprises or individuals are taken into account the gender gap disappears. In the case of enterprises, we explain our finding with differences in key characteristics and a potential selection bias. In the case of individuals, the lower use of formal financial services by women can be explained by gender gaps in other dimensions related to the use of financial services, such as their lower level of income and education, and by their household and employment status.

Financial Inclusion and Financial Integrity: Aligned Incentives?

► Globally financial inclusion and anti-money laundering are viewed as complementary. ► Many new users of formal financial services also use informal financial services. ► In given cases transparency can feature in the client trade-off. ► The alignment can fail where clients are concerned about increased transparency. The Financial Action Task Force embraces financial inclusion as complementary to anti-money laundering and counter-terrorist financing, as it enhances transparency. This support is based on the premise that the increased use of formal financial services leads to a reduction of usage of informal services. We present evidence on eight African countries that both are not negatively associated. Moreover, informal employment and cash preference reduce the inclination to use mobile financial services. If an increase in transparency acts as disincentive to use formal services, the alignment of financial inclusion and integrity will fail.